One of the Andean superstars just a few years ago, Chile’s economy has fallen victim to the lower commodity prices that are hitting all of Latin America. The country posted its lowest growth rate in several years in 2014. While some economists expect it to pick up this year, to around 3%, that is still far from the 5%-plus range of a few years ago.

Lower global oil prices are less of a concern for Chile than the copper prices. The effects of that mineral cheapening are being felt across the economy. Even the project financing industry is taking note: with less investment going into mining, there are fewer potential off-takers for new electricity infrastructure.

Chile has been increasing energy production from renewables at a faster rate than anywhere in the region. But that could be about to change. With fewer miners willing to sign up to long-term power purchase agreements, renewable energy projects are finding it tougher to be financed.

At the center of the issue, however is Codelco. The road ahead for the national mining company and the world’s largest copper producer is representative of the issues facing similar companies across the region, and indeed the globe.

As its mines age, Codelco is finding it tougher to maintain production — never mind increase it. Still, the company is advancing with a large-scale capital expenditure plan designed to set it up for the long run, and it is unlikely to have trouble tapping bond markets any time soon. Additionally, analysts expect the copper price to edge up this year.

At the national level, Chile is taking steps to diversify the way it makes money from the copper industry, moving away from a focus on production. Increasingly, the government is promoting innovative companies, human capital and research and development to cater to the industry globally.

Meanwhile, Michelle Bachelet’s administration is advancing tax and labor reforms as the global environment tests Chile’s economic resilience. The government hopes to increase the national tax take by 3% of GDP in the coming years. The moves have divided economists. The real test of their success, however, will be in the results of investing these new revenues. LF

In this section: 

Tax reforms are dividing economists

The national copper miner feels the strain of low prices

Rodrigo Vergara
Chile’s central bank governor evaluates the country’s economic prospects

Infrastructure finance
The commodity price crash is also being felt in the energy industry